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Facebook to Limit Use of Data Brokers for Ad Targeting

(Bloomberg) -- Facebook Inc. is conducting a broad review of all its data practices and taking a much more conservative stance on some policies, moves that could limit advertisers’ ability to target users on the social network, according to people familiar with the matter.

As part of the changes that will be rolled out over the next few weeks, Facebook said it will no longer let advertisers use information from third-party data brokers, like Acxiom Corp. and Epsilon Data Management LLC, in targeting of ads on its system.

“We believe this step, winding down over the next six months, will help improve people’s privacy on Facebook,” Graham Mudd, Facebook product marketing director, said in a statement about the change in policy on data brokers on Wednesday. The company declined to give details on the larger review of its practices.

The social-media giant has been taking steps to rebuild consumer trust in its data-privacy practices after reports that political-advertising firm Cambridge Analytica had improperly obtained personal information on as many as 50 million users, and then failed to delete it when the leak was detected. Chief Executive Officer Mark Zuckerberg is poised to appear before U.S. lawmakers on Capitol Hill to answer questions in the coming weeks.

In the wake of the scandal, Zuckerberg has asked all of Facebook’s teams to scrutinize their use of data and figure out whether they can explain why they need to access that information, and whether it makes the quality of Facebook better for the user, people familiar with the company said. If the access is not necessary or explainable, it may be changed.

Information from third-party data brokers is most useful to advertisers that don’t directly own the relationships with their customers, including big companies in the automotive, finance and consumer packaged-goods industries. The data companies get customer information from loyalty cards and other methods, and then sell it to the advertisers themselves for use in targeting. Facebook used to make those transactions between brands and third-party marketing firms possible on its own advertising site, but the social network will be making that relationship less convenient over the next six months.

"It could adversely affect advertisers’ ability to target,” said Matt McGowan, president of marketing firm Adestra Ltd. The third-party data integration made it easy and lucrative to spend ad dollars on Facebook, and gave marketers the ability to target users based on their intent to buy something -- a key feature of Google’s rival ad business. "Theoretically, that could drive Facebook advertisers back to Google," he said.

Facebook will still be working with the data companies to provide third-party measurement of their ads’ effectiveness, the company said.

Earlier in the day, the Menlo Park, California-based company said it’s redesigning a menu of privacy settings on its network, giving people more control over the amount of personal information the company keeps on them, like political preferences and interests. Users will be able to delete things they’ve already shared and manage the information the company uses to show ads. Facebook last week also pledged to investigate and audit all apps that were allowed to get information on users and their friends before the company changed its policies in 2014.